tv Nightly Business Report PBS August 29, 2012 4:30pm-5:00pm PDT
>> this is n.b.r. >> tom: good evening. i'm tom hudson. the u.s. economy, perked up in the spring, but is it sustainable without help from ben bernanke and the fed? >> susie: i'm susie gharib. mitt romney's top economic advisor joins us from the republican national convention. he says tax and regulatory reforms could create millions of jobs, and boost the economy. tonight's market guest thinks we've seen the highs for the year, he's strategist stephen wood of russell investments. >> susie: that and more tonight on "n.b.r."!
will he or won't he? that's the burning question on wall street. will ben bernanke unveil a new plan on friday to stimulate the economy? the fed chairman might have second thoughts about doing anything given news today that the economy grew faster than previously thought. the g.d.p. rose at an annual rate of 1.7% in the second quarter, up from the 1.5% originally reported. also today, the federal reserve's beige book report showed all of the central bank's 12 districts expanded gradually in july and august, thanks to a pick up in housing, and retail sales. still, the economy is not where it should be, and that has many stock investors on edge. suzanne pratt reports. >> reporter: the last week of august is one of the quietest of the year here at the new york stock exchange. a quick look at the paltry trading volume tells that story. but, look out for friday. that's when federal reserve
chairman ben bernanke gives a speech in jackson hole, wyoming to economists and central bankers. investors are hoping he'll indicate he's ready to do a new round of bond purchases, designed to keep interest rates low and encourage more borrowing. but, floor broker doreen mogavero says that's unlikely, given the slightly brighter outlook for the economy. >> this year's a little different. you have an election coming up and people already accused him of being very political in the event that he does come out and say something at this particular meeting. but, i think mr. bernanke will be steadfast and say he will be there to prop us up should we need it. >> reporter: in 2010, bernanke used the rocky mountain venue to hint at a second round of bond purchases, dubbed quantitative easing or qe-2. his comments sparked a nice rally for the stock market. this year stocks have been in rally mode all summer long, as traders speculate some type of fed action will happen by september.
the thinking is that bernanke would lay it out at jackson hole, and do it at the central bank's policy meeting on september 12 and 13. some now believe the fed will use that september opportunity to change its timetable for keeping rates low. >> right now the fed has said they're not going to raise interest rates until the end of 2014. we think they could extend that into 2015 at the next f.o.m.c. meeting. so, we could see the fed chairman talk a little bit more about the pros and cons of doing something like that. >> reporter: after friday and jackson hole, investors are likely to refocus their attention on europe's financial mess and of course there's also that big election in the u.s. in november. suzanne pratt, "n.b.r.," new york. >> susie: american voters will learn more tonight about mitt romney's plan to fix the country's economic problems. the governors running mate, paul ryan will be addressing the republican national nvention.
earlier today i got a preview from glenn hubbard; he's romney's chief economic advisor, and dean of columbia university's school of business. my first question: if romney is elected president, what's the first thing he will do to get the economy growing again? >> what he has said that is has a very strong what he calls day one agenda, which woo would be using the resolution of the fiscal cliff the focus attention on the tax code and tax reform, particularly tax reform for businesses. he would also repeal obama care as much as can be done through state waivers and focus there. so it's a very tax, budget and regulatory focused economic agenda. >> susie: mitt romney has talked a lot about tax cuts, but we know that in a weak economy when you cut taxes, people save the money. they're still too afraid to spend it. so how would that get the economy growing again? >> well, you're making an argument about temporary tax
cuts. what governor romney is talking about is permanent tax reform that would slash marginal tax rates across the board by 20%. but that's paid for in part by economic growth, but in large part by base broadening. so it's not the kind of temporary tax cut you suggest. it's radical tax reform. >> susie: when you talk about base broadening, some people say that's short hand for doing away with tax breaks that many americans have come to rely on, like the deductions for mortgages. is governor romney going to do away with those popular deductions? >> i don't think there's a need to do away with deductions as you put it. the question is limiting those and what governor romney has said is two things. first of all everything is on the table, this is real tax reform, and second the burden of the adjust president has to be borne by upper income families. so middle income families really won't see much of a change. >> susie: nobody likes to see tax hikes, but people are really worried about these huge deficits, and i understand there's this clock in the convention hall behind
you there where it shows the national debt rising second by second. if there are more tax cuts, won't this make that debt clock just tick even faster? >> no. agn, what governor romney is proposing is tax reform, not a tax cut. so it's revenue neutral. the issue facing the country in deficits is how to get government spending back to where it was before the financial crisis as a share of our economy. under president obama spending had ratcheted up to 24% of gdp, 20% is our long-term average. that's where governor romney wants to take it. >> susie: glen, let's talk a little about jobs, because this is a big issue for voters. governor romnehas said he would create 12 million jobs during his first term as president. how would he do that? >> well what governor romney is doing is not, quote, creating jobs. he's setting an economic environment that enables the millions of men and women all over the country who are in
the private sector to create those jobs, and the figure of 12 million jobs for a first term would be similar to what we've seen in other recoverys from deep recessions in the past. >> susie: but so many c.e.o.s i talk to on our program, c.e.o.s of big companies and small companies, say that they are not hiring because in this weak ecomyhere just isn't the demand to justify new hires. what would governor romney say to that? >> first of all when i speak to business executives, which i do a lot, they of course talk about the weak economy but they also talk about the enormous uncertainty they face in every aspect of their life that really delays long-term investments, whether those investments are in people, factories or equipment. building demand in this country is about making america a place to invest and to grow. that requires a more pro business policy mix than wve seenn th past fe years. >> susie: right now the unemployment rate is over 8%. in four years, where will that
rate come down to in a romney presidency? >> well, with the economic growth that we forecast we should be able to get the unemployment rate to go back into the 6% or lower range. the real issue is getting people working again, as you know, the unemployment rate doesn't quite capture the labor market because of discouraged workers. the real issue is creating an environment that would enable this economy to create the jobs that it can create, that of course will bring unemployment down. there's nothing that suggests if we continue the present policy mix that we're going to bring unemployment down at all. >> susie: glen hubbard also told me he doubts ben bernanke will announce any new plan in his jackson hole speech, he believes it's up to lawmakers in washington to change government policy, saying there's not much more the fed can do to speed up the economic recovery. >> tom: still ahead, higher prices could soon be on the menu at your favorite chinese restaurant, it's just one way this summer's midwestern drought
will impact consumers. another sign of recovery in the housing market. the national association of realtors tracks homes under contract. it's pending sales index rose to a reading of 101.7 in july, that's up nearly 2.5% from the previous month. that's the highest reading since april of 2010, when the homebuyer tax credit boosted sales. on wall street, stocks ended pretty much where they began, the dow and nasdaq both up four, the s&p 500 adding one point.
>> susie: hedge funds could start advertising in the coming months. in a four-to-one vote today, the s.e.c. started the process of lifting a decades-old ban on ads for private securities offerings. sylvia hall looks at what it could mean, for the hedge fund industry, and investors. >> reporter: it would be really hard to look around times square and not see an advertisement. businesses of all kinds pay big bucks to put their brands here, but one thing you won't see plastered across these billboards, or any billboard or advertisement, are the words "hedge fund." for decades, they have been banned from advertising to the general public. but earlier this year, congress loosened the ban as part of the jumpstart our business startup, or jobs act. the s.e.c.'s proposal starts the process of lifting the restriction, giving hedge funds the ability to brand themselves, and disclose more details to the public. >> i think it will actually make the industry much more competitive, differentiated, and better. you will see better players and
stronger players coming out from the jobs act, and it will also help create jobs. >> reporter: adam guren is with a small firm called hunting hill global capital. like many in the field, the firm'sebsite doesn't offer manyetails about its investment strategy and philosophy. if the new rule is finalized, guren wants to share more information with the general public. but hedge fund investments aren't for everyone, they come with unique risks and are limited to accredited investors. that means households with a net worth of more than $1 million, excluding their home, or two years of income exceeding $200,000, or $300,000 for couples. the rule poses challenges, and opportunities, for advertisers, because they'd have a very small target audience. >> as exciting as advertising and marketing is, you have to bare in mind that you want to generate high quality leads, not necessarily just high volumes of leads. its expensive to get inquiries from investors who are only going to be disappointed. that takes time and money away from focusing on investors who
would be qualified. >> reporter: consumer advocates worry the new rule could also open the door to scam artists targeting wealthy but inexperienced investors. they want the final draft to have more protections, like requirements that firms check a clients' investing experience. >> there are still plenty of consumers who meet that test who are unsophisticated and vulnerable to fraud. so we think that rule should include some sort of test to make sure that they know what they're doing. >> reporter: the rule will still need to get through one more vote. the public has one month to comment before the s.e.c. finalizes it. sylvia hall, "n.b.r.," washington.
>> tom: isaac made landfall in louisiana as a hurricane early last night, and again early this morning. although it's now a tropical storm, it is a slow moving system bringing more rain than hurricane katrina did when she hit seven years ago today. off-shore, the damage done to oil rigs is expected to be limited. a bael of lit sweet crude slid lower, down about 1% at $95.49 a barrel. but retail gasoline prices edged higher, the national average for a regular gallon of gas gained a nickel, to $3.80 a gallon. >> susie: heavy rain from isaac is expected to travel up to the mid-west bringing relief to parched crops. that could help salvage much of the nation's soybean crop. soybean prices are 20% higher than they were a year ago. as diane eastabrook reports, if they keep climbing you could pay more for your favorite chinese
meal. >> reporter: the kitchen at sun wah, in chicago is 50 miles from the nearest farm. but the drought could burn the chinese restaurant just like its burning the soybeans used to make tofu served in many of its dishes. the cheng family owns sun wah and sun xien; a factory on chicago's south side that makes tofu for its restaurant and 40 other local eateries and markets. here soybeans are soaked, husked, cooked, molded, cut, and packaged. sales manager kelly cheng says thiss a business that is competitive and price sensitive. >> we have to pay attention to not just the soybean prices, we actually have to pay attention to corn prices, oil prices because it does affect delivery and obviously we have to pay attention to the weather. if there is a drought that will bring everything up. >> reporter: and it has. the government estimates the drought will reduce u.s. soybean
production 12% this year over last. that has sent soybean prices above $17 a bushel at the c.m.e. group. a year ago prices were around $13. the sun xien company bought about 35,000 pounds of soybeans just a couple of weeks ago and paid about $17,000. now this should last through the fall, but once the company has to buy more beans it's hard to say what the price of beans will be. >> we might be looking at $20,000. we might be looking at 15. it's really hard to tell. some people will get out of buying the soybeans if it's too high, no demand so it might bring it down a little bit. >> reporter: recent rains an cooler weather could reduce soybean losses and south america could also produce a large crop. but analysts say those are wild cards in a market that had tight supplies going into this growing season. >> you have a dwindling supply and a very consistent demand coming out of asia. the bigger buyer of soybeans
continuing to be china and that buyer is still very much in the market. >> reporter: cheng says if soybeans are higher at the end of the year, sun xien may have to hike tofu prices early next year. and that could make sun wah's spicy pork and tofu soup a little more expensive. diane eastabrook, "n.b.r.," chicago. >> susie: the fortune 500 has one less female ceo today. angela braly stepped down as c.e.o. of wellpoint, the big health insurer. her departure comes after a disappointing second quarter, and a cut in guidance from the company. wellpoint is in the process of taking over amerigroup, and analysts say that company's c.e.o. could be a potential replacement for braly. wellpoint stock surged on the news: up more than 7% to $61.80. tom, otherwise in the markets very, very slow, quiet day. either investors and traders are on the side line waiting for that jackson hole speech of ben bernanke, or they're
just on vacation, so these are the summer doldrums. >> tom: it really was a day of individual stocks making individual news and individual moves as opposed to the broad market. >> tom: let's get going with tonight's "market focus." >> tom: flat and thin best describes stock trading over the past several sessions, including today. the market has not had much conviction as the summer winds down. it was another directionless, and narrow trading range with the s&p 500 ending with a fractional gain. the index hasn't made a closing daily move of 1% or more since early august. trading volume tells part of the story. it continues to be very light. 508 million shares on the big board. under 1.3 billion on the nasdaq. making the biggest moves among stock sectors was the telecommunications sector, up 0.7%. on the downside was energy, lling 0.6%. while the broad market is quiet, those few companies reporting earnings are moving their individual stocks. mining equipment maker joy global was one of those. the stock initially fell after
cutting its profit outlook for the second time this year. the slowdown in europe and asia got the blame, but shares were able to recover, ending with a 2.6% gain. volume was six times average. today's gain came despite joy global reporting disappointing earnings and sales in addition to its lower outlook. earnings per share in the third quarter came in six cents less than estimates. ketchup maker heinz earned six nts more tn pectedn its latest quarter, and up double digits from a year ago, even as revenues fell. shares fell 2.3% but they're coming off a 52 week high yesterday. the company said it will increase its marketing this quarter, hoping to keep sales growth up in developing economies. investors were suiting up with men's clothing retailers, thanks to online strategies helping earnings at joseph a bank clothiers. j.o.s.b. jumped 14% after easily topping quarterly earnings estimates.
its direct sales unit, including online sales, saw buness jum almost 40%. competitor men's wearhouse caught a bid too, up 3.6%. both stocks are at the highest prices in three months. after the close tonight, the focus was on internet radio operator pandora. pandora broke even in its fiscal second quarter. analysts expected pandora to lose money. the company credited encouraging results for its mobile advertising strategy. after dropped 1% during the regular session, shares shot up more than 8% after the closing bell. pandora raised its outlook, expecting to see a big jump in its ads over mobile devices. today was the day insiders got unlocked, they could sell their shares after the i post if they've wanted to, instead some called it a classic short squeeze, the stock rising on
very heavy volume. three of t five most actively traded e.f's were higher today. the nasdaq 100 tracking fund was unchanged. the emerging markets fund fell by 0.5%. and that's tonight's "market focus." russell investments cautioned investors today, the stock market bubbling its highs for the year. chief market strategist is with us. you and your team expect the s&p 500 to en the year 1357.
nice gain from back in january, but well below where we are tonight. why the pessimism from where we are today? >> exactly, 1375 is our number, that's about 760 on the russell 1,000, the reason for that is there's a lot of uncertainty out there. we've got an onomic situation in the united states which is far from robust, but not recessionary either. but also you've got a lot of politically induced uncertainty in the united states, the fiscal cliff, the upcoming election, a lot of very large mistakes have been made over the last 20 years, and now coming to bear. also you've got an economic cyclical downturn in china as well. so for those reasons we think it's going to be volatile, probably a bit of weakness going into the end of the year, nothing dramatic, but a bit lower from where it is now. >> tom: a disizationon kiss content. you aren't telling clients to move out of the way spirely, but to get more defensive. are you expecting still some
gains here? >> we think so, because you look at the consumer, he's far from dead, he's still going to continue to be about 70% of the u.s. economy, but there's great companies with great strong balance sheets especially in the united states, you look at corporate earnings being close to all-time highs, they're slowing down, but close to record highs. revenues and sales are getting challenged, but you want to look at the strong companies with great global franchises that can execute in a soft environment. there's a lot names in the consumer space that our managers like. >> tom: a more classic defense posture is in health care, the xlv fun has climbed nicely since the fall, and has picked up a bit since we had afirmation from the supreme court about the health reform, haven't we? >> certainly, the affordable care act or obama care more commonly referred to, the supreme court decision really pulled away a lot of the up certainty about whether or not it would be a law. since it is now a law the winers and losers in that space have become more easy to
identify. so more defensive, but also higher quality, visibility of the earnings of those businesses. so you've got the political uncertainty behind it and also you've got less exposure to the global economy and a lot of the volatility, so it's easier to see what 2013 might look like for a lot of these companies. >> tom: on the one has been you're looking at the election, on the other you're looking at the consumer in those two picks. do you have positions in those funds? >> in personal accounts in the russell fund yes. >> tom: stephen wood with russell investments. thank you. >> susie: tomorrow on "n.b.r." dissent within the federal reserve, while chairman ben bernanke preaches patience, waiting for more data before deciding on additional help for the economy. some regional federal reserve bank presidents are urging him to take action now. >> tom: among the unwritten rules of shopping: don't go to the grocery store hungry. if you walk out of a store with more than you planned to buy, you're not alone. tonight's commentator says one
retailer in particulars al about the impulse buy. here's todd buccholz, author of "rush: why you need and love the rat race." >> i don't belong to many clubs. i carry two membership cards in my wallet: one is from the a.a.a., in case i get a flat tire. the other is more fun-- it's my card from costco. oh, i know costco isn't the kind of club you play golf at, or sit around on wicker chairs sipping mint julep in the summer. it's a store, and believe it or not, i'm not a shop-till-you- drop kind of guy. in fact, the moment i walk into most sres, i start to feel weak and want to drop down and sink into the nearest chair. so why do i enjoy costco? in my book rush, i point out that costco draws on behavioral economics. costco does not carry the same stuff week after week. it turns shopping into a hunting expedition; you never know what you'll find. hey, are they giving away dubliner cheese near the tommy bahama shirts? our brains are attracted to new
things and love surprises. at the same time, costco has a great return policy, which makes buyers feel more confident. of course, i'm a shareholder, why wouldn't i buy shares in just about the only store i like to walk into? i'm todd buchholz >> reporter: as the election unfolds, the nation is heading for the first planned recession in its history, courtesy of the fiscal cliff. why are politicians ignoring the danger? on labor day, we'll hear from two men working to change our course: erskine bowles and alan simpson, the co-chairs of the commission on deficit reduction. we'll also hear from businesses and workers with jobs on the 4v-pjoin us on monday for a spel report on jumping the fiscal cliff. >> susie: and if you can't wait until labor day, we have a fiscal cliff preview on the web. it's on www.nbr.com, just click on "fiscal cliff" under the topics tab. that's nightly business report
for wednesday, august 29, have a great evening everyone, and you too tom. >> tom: goodnight susie, we'll see you at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> join us anytime atbr.com. there, youl fi ful episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.